''South Australia v Commonwealth'' ("the First Uniform Tax case"). is a decision of the
High Court of Australia The High Court of Australia is the highest court in the Judiciary of Australia#Australian court hierarchy, Australian court hierarchy and the final appellate court, court of appeal. It has both Original jurisdiction, original and appellate juris ...

High Court of Australia
that established the
Commonwealth government The Australian Government, also known as the Commonwealth Government, is the national government of Australia, a federalism, federal parliamentary system, parliamentary constitutional monarchy. Like other Westminster system, Westminster-style ...
's ability to impose a scheme of uniform
income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Taxa ...
across the country and displace the State. It was a major contributor to Australia's vertical fiscal imbalance in the spending requirements and taxing abilities of the various levels of government, and was thus a watershed moment in the development of
federalism in Australia Federalism is a mixed or compound mode of government A government is the system or group of people governing an organized community, generally a State (polity), state. In the case of its broad associative definition, government norm ...


In 1942, during the
Second World War World War II or the Second World War, often abbreviated as WWII or WW2, was a global war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all the great powers—forming two opposing m ...
, the Commonwealth government needed extra revenue for the war effort. At the time, income taxes were levied at both the State and federal level. The Commonwealth requested the States to transfer their taxing powers for the duration of the war to allow one uniform national income tax system, with grants given back to the states to compensate for the lost revenue. Doubting that the powers would be returned, the states rejected the request. In response, the Commonwealth moved to occupy the field unilaterally. As s51(ii) of the
Constitution A constitution is an aggregate of fundamental principles or established precedents that constitute the legal basis of a polity, organisation An organization, or organisation ( Commonwealth English; see spelling differences), is an ...

only allows the Commonwealth to impose federal taxation for federal purposes, it could not cover the field of taxation with any law. Nevertheless, the Commonwealth introduced a uniform income tax through an intricate scheme of four pieces of legislation. * The Income Tax Act 1942, raised income tax levels to the existing state levels, setting it at such a rate that made it politically impossible for states to impose their own income taxes. The amount raised was enough to cover the war effort and grants for the states * The States Grants Act 1942, provided a grant for each state equal to what it would have raised on its own income tax, on the condition that it did not raise its own income tax * Section 221 of the Income Tax Assessment Act 1942, required taxpayers to meet their Commonwealth tax liabilities before state tax liabilities * the Income Tax (Wartime Arrangements) Act 1942, required that the states transfer to the Commonwealth all state staff, offices, furniture and records used to collect income tax The laws were challenged by the states of
South Australia South Australia (abbreviated as SA) is a States and territories of Australia, state in the southern central part of Australia. It covers some of the most arid parts of the country. With a total land area of , it is the fourth-largest of Australi ...
, Victoria,
Queensland Queensland ( ,) is a state situated in northeastern Australia, and is the States and territories of Australia, second-largest and third-most populous Australian state. It is bordered by the Northern Territory, South Australia and New South Wale ...
Western Australia Western Australia (abbreviated as WA) is a States and territories of Australia, state occupying the western percent of the land area of Australia excluding external territories. It is bounded by the Indian Ocean to the north and west, and the So ...


The High Court held the laws were valid, despite the practical result being the inability of the states to impose income tax. The Income Tax Act 1942, was held to be valid despite the fact the rate was so high as to preclude the states from imposing income tax. As taxation is a non-purposive power, regardless of the object of the law, the subject matter was taxation, and hence valid under section 51(ii) of the Constitution. The States Grants Act 1942, was held to be valid, despite its coercive effect. The Commonwealth can use the section 96 grants power to induce a state to exercise its own powers as well as abstain from using its powers. Hence the Commonwealth can do such things to encourage or discourage a state from exercising its powers, which are technically not coercion. Indirect compulsion is constitutional. While the Act made it almost impossible for the States to continue taxing, Chief Justice of Australia, Chief Justice John Latham (judge), John Latham noted that the states still had the choice not to accept Commonwealth grants. Justice Edward McTiernan also considered the Act valid under the defence power. Section 221 of the ''Income Assessment Act 1942'', was held to be valid pursuant to section 51(ii) or was at the least valid under the implied incidental power. The subject matter of the law and the purpose of the law were both with respect to matters of taxation. McTiernan justified this section as valid under the defence power. The Income Tax (Wartime Arrangements) Act 1942, was upheld by a majority under the defence power.


The decision in relation to section 221 of the ''Income Assessment Act 1942'' was subsequently overturned by the High Court in the Victoria v Commonwealth (1957), Second Uniform Tax case..

See also

* Constitutional basis of taxation in Australia * Australian constitutional law * Taxation in Australia


* {{cite book , author1=Gerangelos, P , author2=Aroney, N , author3=Lee, HP , author4=Murray, S , author5=Evans, S , author6=Emerton,P , display-authors=1 , title=George Winterton, Winterton's Australian federal constitutional law: commentary and materials , year=2013 , edition=3rd , publisher=Thomson Reuters , ISBN=9780455230412 High Court of Australia cases 1942 in Australian law Australian constitutional law Taxation in the Australian Constitution cases Grants power in the Australian Constitution cases 1942 in case law